House panel hears minimum wage hike proposals

By Bob Sanders

Published: January 30, 2013

Lago's Ice Cream in Rye would have to increase the price of a cone by a quarter and sell thousands more of them to get the money to pay its teenage crew the 75 cents an hour more required by the most conservative of the three minimum wage bills proposed this year, estimated Steve Grenier, the owner of the business, at a hearing held Tuesday before the House Labor Committee.

But if everybody's wages were increased, "wouldn't that result in more disposable income and more sales?" asked Rep. Michael Cahill, D-Newmarket.

Grenier couldn't see it.

"We'd have to sell 6,000 cones a month. We couldn't do it," said Grenier.

And that's the problem, said Sara Dustin, one of the many advocates for working families who testified at the hearing. Small businesses -- even large chains like McDonald's -- are "unfortunately short-sighted," she said. "With a minimum wage, they are so close to the edge, that if they have an extra $12 a week in their paycheck, they can afford to take the children out to McDonald's once in a while."

That was the debate in a nutshell.

During the hearing, business group after business group testified against instituting a state minimum wage above the federal minimum of $7.25 an hour.

Two bills were heard by the Labor Committee on Tuesday. House Bill 241 would set the minimum wage at $9.25. HB 127 would start out at $8 an hour; after that, the minimum wage would be tied to the Northeastern Consumer Price Index, although the Legislature would have to approve any increase.

Another measure, HB 501, which does not have a hearing date yet, would set the minimum wage at a dollar above the federal minimum.

All three bills, said House Labor Committee Andrew White, would be examined in the same subcommittee in detail.

Some 14,000 people are paid minimum or sub-minimum wages in the state (people who wait on tables are paid 45 percent of the minimum, with the rest theoretically made up in tips) and a quarter of them are adults -- figures that some committee members had difficulty believing. Raising the minimum wage would not only affect them but those who are now paid wages between the federal and state minimum. A higher minimum would probably push up the wages of everybody else, agreed both sides, though proponents saw that as positive, while opponents fretted over the cost.

"This has a ripple effect on employers throughout the state," said David Juvet, vice president of the Business and Industry Association of New Hampshire. "It increases the price of labor, already the number one cost, but it affects payroll taxes as well."

Higher wages would mean higher Social Security taxes, he said. They would create more of a drain on the unemployment trust fund, because the compensation rate is tied to wages, and that could increase the unemployment tax on businesses. They would mean a larger business enterprise tax bill for businesses, because that too is tied to wages. The last point was raised by Curtis Barry, a lobbyist with the Retail Merchants Association of New Hampshire.

"The biggest cost will be jobs," he insisted.

The annual cost of a minimum wage increase would be about $2,400 a worker, Barry estimated. And the only way that worker's employer, already on a very thin margin, could make that up is to "reduce hires, cut back on hours or lay people off."

That, said Barry, would result in more disposable income, not less.

But comprehensive studies don't back up that prediction, said Judy Elliot of the New Hampshire Coalition for Occupation and Health. A study that looked at 100 counties nationwide found "no detectable employment loss," she said, adding that a statewide increase wouldn't put employers at a competitive disadvantage because "the hot dog vendor down the street will have to raise his prices too.

"Dan Feltes, a staff attorney with New Hampshire Legal Assistance, proposed matching Maine's minimum wage of $7.50 an hour -- the lowest minimum wage of New Hampshire's neighboring states. Massachusetts' wage is $8 an hour, and in Vermont, where the minimum wage is tied to the consumer price index, is $8.60.

This article appears in the January 25 2013 issue of New Hampshire Business Review